What is a Commercial Auto Insurance Policy? Everything You Need to Know!

If you own or operate a business that uses vehicles, you need a commercial auto insurance policy. A commercial auto insurance policy is a type of insurance policy that covers the damages and injuries that may result from accidents involving your vehicles and drivers. It protects your business from the financial consequences of these accidents and helps you comply with the state and industry regulations that apply to your business.

According to the National Highway Traffic Safety Administration (NHTSA), there were more than 5.8 million police-reported motor vehicle crashes in the US in 2019, resulting in more than 36,000 fatalities and 2.7 million injuries. The total economic cost of these crashes was estimated at $242 billion, including $57 billion in property damage and $35 billion in lost productivity.

A commercial auto insurance policy can help you avoid or reduce these costs by providing various types of coverage options. These options cover the damages and injuries that you or your employees may cause to others, as well as the damages and injuries that you or your employees may suffer from others. They also cover the damage or loss of your own vehicles in case of an accident or other event.

In this article, we will explain everything you need to know about a commercial auto insurance policy, such as who needs it, what it covers, and how much it costs. We will also provide some tips on how to obtain and maintain a commercial auto insurance policy that meets your business needs.

Who Needs a Commercial Auto Insurance Policy?

A commercial auto insurance policy is different from a personal auto insurance policy. A personal auto insurance policy covers the damages and injuries that may result from accidents involving your personal vehicles and drivers. A commercial auto insurance policy covers the damages and injuries that may result from accidents involving your business vehicles and drivers.

The type of auto insurance policy that you need depends on the type of vehicle and driver that you use for your business. There are some criteria that determine whether a vehicle or driver needs a commercial auto insurance policy, such as:

• The ownership of the vehicle: If the vehicle is owned by your business or registered under your business name, you need a commercial auto insurance policy. If the vehicle is owned by you or your employee and used for both personal and business purposes, you may need a commercial auto insurance policy or a personal auto insurance policy with a business use endorsement.
• The usage of the vehicle: If the vehicle is used for business purposes, such as transporting goods, materials, equipment, or passengers for a fee, you need a commercial auto insurance policy. If the vehicle is used for personal purposes, such as commuting to work, running errands, or traveling for leisure, you may need a personal auto insurance policy or a commercial auto insurance policy with a personal use endorsement.
• The weight of the vehicle: If the vehicle is heavy or has a high load capacity, such as a truck, a van, a bus, or a trailer, you need a commercial auto insurance policy. If the vehicle is light or has a low load capacity, such as a car, a motorcycle, or an SUV, you may need a personal auto insurance policy or a commercial auto insurance policy with a light use endorsement.
• The cargo of the vehicle: If the vehicle carries hazardous materials, such as explosives, flammable liquids, or radioactive substances, you need a commercial auto insurance policy. If the vehicle carries non-hazardous materials, such as groceries, furniture, or clothing, you may need a personal auto insurance policy or a commercial auto insurance policy with a non-hazardous use endorsement.
• The license of the driver: If the driver has a commercial driver’s license (CDL), such as Class A, B, or C, you need a commercial auto insurance policy. If the driver has a regular driver’s license (RDL), such as Class D or E, you may need a personal auto insurance policy or a commercial auto insurance policy with a regular use endorsement.
• The employment of the driver: If the driver is your employee or contractor and drives your vehicle for your business purposes, you need a commercial auto insurance policy. If the driver is your employee or contractor and drives their own vehicle for your business purposes, you may need a commercial auto insurance policy with a non-owned use endorsement. If the driver is not your employee or contractor and drives your vehicle for their own purposes, you may need a personal auto insurance policy or a commercial auto insurance policy with a permissive use endorsement.
• The compensation of the driver: If the driver is paid by you or your business for driving your vehicle, you need a commercial auto insurance policy. If the driver is not paid by you or your business for driving your vehicle, you may need a personal auto insurance policy or a commercial auto insurance policy with a non-compensated use endorsement.

Some examples of vehicles and drivers that need a commercial auto insurance policy are:

• A delivery company that owns a fleet of vans to transport goods for its clients. The vans are registered under the company name and driven by the company employees who have CDLs and are paid by the company.
• A landscaping company that finances a truck and a trailer to carry its equipment and materials. The truck and trailer are registered under the company name and driven by the company owner who has a RDL and is not paid by the company.
• A taxi service that leases a fleet of cars to transport passengers for a fee. The cars are registered under the leasing company name and driven by the taxi drivers who have CDLs and are paid by the taxi service.
• A construction company that borrows a truck from a supplier to haul some materials. The truck is registered under the supplier name and driven by the construction worker who has a RDL and is paid by the construction company.

What are the Coverage Options for a Commercial Auto Insurance Policy?

A commercial auto insurance policy provides various types of coverage options that cover the damages and injuries that may result from accidents involving your vehicles and drivers. These options cover the damages and injuries that you or your employees may cause to others, as well as the damages and injuries that you or your employees may suffer from others. They also cover the damage or loss of your own vehicles in case of an accident or other event.

The main types of coverage options that are available for a commercial auto insurance policy are:

• Liability coverage: This coverage covers the legal liability that you or your employees may have in case of an accident involving a third party. It consists of two components: bodily injury liability and property damage liability. Bodily injury liability covers the medical expenses, lost wages, pain and suffering, and legal fees that you or your employees may have to pay to a third party who is injured or killed in an accident caused by you or your employees. Property damage liability covers the repair or replacement costs, loss of use, and legal fees that you or your employees may have to pay to a third party whose property is damaged or destroyed in an accident caused by you or your employees.
• Physical damage coverage: This coverage covers the damage or loss of your own vehicles in case of an accident or other event. It consists of two components: collision coverage and comprehensive coverage. Collision coverage covers the damage or loss of your vehicle due to a collision with another vehicle or object, such as a tree, a pole, or a guardrail. Comprehensive coverage covers the damage or loss of your vehicle due to any other event, such as fire, theft, vandalism, hail, flood, or animal strike.
• Uninsured/underinsured motorist coverage: This coverage covers the damages and injuries that you or your employees may suffer from an accident involving a driver who has no or insufficient insurance. It consists of two components: uninsured motorist bodily injury and uninsured motorist property damage. Uninsured motorist bodily injury covers the medical expenses, lost wages, pain and suffering, and legal fees that you or your employees may have to pay to yourselves or each other if you are injured or killed in an accident caused by an uninsured driver. Uninsured motorist property damage covers the repair or replacement costs, loss of use, and legal fees that you or your employees may have to pay to yourselves or each other if your vehicles are damaged or destroyed in an accident caused by an uninsured driver.
• Medical payments coverage: This coverage covers the medical expenses that you or your employees may incur in case of an accident involving injuries to yourselves or your passengers, regardless of who is at fault. It covers the medical expenses such as ambulance fees, hospital bills, surgery costs, medication costs, etc. It does not cover the lost wages, pain and suffering, or legal fees that may result from an injury.
• Personal injury protection coverage: This coverage covers the medical expenses, lost wages, pain and suffering, and legal fees that you or your employees may incur in case of an accident involving injuries to yourselves or your passengers, regardless of who is at fault. It is similar to medical payments coverage, but more comprehensive and expensive.
• And more: Depending on your insurer and your policy, you may have access to other types of coverage options for a commercial auto insurance policy, such as rental reimbursement, towing and labor, roadside assistance, gap insurance, etc. These options may cover the cost of renting a substitute vehicle, towing your vehicle, providing roadside assistance, paying the difference between the value and the loan amount of your vehicle, etc.

Each type of coverage option covers different situations and has different benefits and limitations. You should consult with your agent or insurer to find out what coverage options are available for your business and how they can benefit you. You should also compare the availability and cost of each coverage option among different insurers to find the best deal.

How Much Does a Commercial Auto Insurance Policy Cost?

The cost of a commercial auto insurance policy depends on several factors that affect the risk and the value of your vehicles and drivers. These factors include:

• The type, value, usage, and location of your vehicles: The type of your vehicle determines the size, weight, and load capacity of your vehicle, which affect the potential damage and injury that it can cause or suffer in an accident. The value of your vehicle determines the cost of repairing or replacing your vehicle in case of an accident or other event. The usage of your vehicle determines the frequency, distance, and purpose of your trips, which affect the exposure and likelihood of an accident. The location of your vehicle determines the traffic conditions, weather conditions, and crime rates that your vehicle may encounter, which affect the severity and probability of an accident or other event.
• The number, record, and training of your drivers: The number of your drivers determines the total mileage and the number of vehicles that you need to insure, which affect the exposure and likelihood of an accident. The record of your drivers determines the history of accidents, violations, or claims that your drivers have had, which affect the risk and probability of an accident. The training of your drivers determines the skills, knowledge, and behavior that your drivers have, which affect the prevention and mitigation of an accident.
• The type and amount of coverage chosen: The type of coverage that you choose determines the situations and expenses that are covered by your policy in case of an accident or other event. The amount of coverage that you choose determines the limit or maximum amount that your insurer will pay for each type of coverage in case of an accident or other event.
• The deductible amount: The deductible is the amount that you have to pay out of your own pocket before your insurer pays for the rest of the claim. The higher your deductible, the lower your premium.
• The claims history: The claims history is the record of claims that you have made or received under your policy. The more claims that you have made or received, the higher your premium.

The cost of a commercial auto insurance policy can vary widely depending on these factors. According to Insureon, a leading online marketplace for small business insurance, the median cost of a commercial auto insurance policy in the US was $142 per month or $1,704 per year in 2019. However, the actual cost of a commercial auto insurance policy for your business may be higher or lower than this median cost depending on your specific situation.

There are some ways that you can reduce the cost of a commercial auto insurance policy for your business, such as:

• Maintaining a good driving record: A good driving record shows that you and your drivers are safe and responsible drivers who are less likely to cause or be involved in an accident. A good driving record can lower your risk and premium.
• Choosing a safe vehicle: A safe vehicle is a vehicle that has safety features, such as airbags, anti-lock brakes, seat belts, etc., that can prevent or reduce the damage and injury in an accident. A safe vehicle can lower your risk and premium.
• Installing safety devices: Safety devices are devices that can enhance the security and protection of your vehicle, such as alarms, locks, GPS trackers, cameras, etc., that can deter or detect theft, vandalism, or other events. Safety devices can lower your risk and premium.
• Training your drivers: Training your drivers is providing your drivers with education and instruction on how to drive safely and efficiently, such as defensive driving courses, driver improvement programs, driver safety seminars, etc. Training your drivers can lower your risk and premium.
• Following the traffic rules: Following the traffic rules is obeying the laws and regulations that govern the use of vehicles on the road, such as speed limits, traffic signs, traffic signals, lane markings, etc. Following the traffic rules can lower your risk and premium.
• Shopping around: Shopping around is comparing different coverage options and quotes from different insurers to find the best deal for your business. Shopping around can lower your cost and premium.

There are some resources where you can find and compare quotes from different insurers for a commercial auto insurance policy for your business, such as:

• Online tools: Online tools are websites or applications that allow you to enter some information about your business and receive quotes from different insurers in minutes. Some examples of online tools are Insureon, CoverWallet, Progressive Commercial, etc.
• Agents or brokers: Agents or brokers are professionals who represent one or more insurers and help you find and purchase a commercial auto insurance policy for your business. They can provide you with personalized advice and service based on your needs and preferences. Some examples of agents or brokers are State Farm, Allstate, Farmers, etc.
• Direct insurers: Direct insurers are insurers that sell commercial auto insurance policies directly to customers without involving agents or brokers. They can provide you with lower prices and faster service by eliminating the middlemen. Some examples of direct insurers are GEICO, USAA, Esurance, etc.

Conclusion

A commercial auto insurance policy is a type of insurance policy that covers the damages and injuries that may result from accidents involving your vehicles and drivers. It protects your business from the financial consequences of these accidents and helps you comply with the state and industry regulations that apply to your business.

There are various types of coverage options that are available for a commercial auto insurance policy, such as liability coverage, physical damage coverage, uninsured/underinsured motorist coverage, medical payments coverage, personal injury protection coverage, etc. Each type of coverage covers different situations and has different benefits and costs. You should compare different coverage options and quotes from different insurers to find the best deal for your business.

The cost of a commercial auto insurance policy depends on several factors that affect the risk and the value of your vehicles and drivers, such as the type, value, usage, and location of your vehicles, the number, record, and training of your drivers, the type and amount of coverage chosen, the deductible amount, the claims history, etc. You should look for ways to reduce the cost of a commercial auto insurance policy by maintaining a good driving record, choosing a safe vehicle, installing safety devices, training your drivers, following the traffic rules, shopping around, etc.

A commercial auto insurance policy can help you avoid legal troubles, protect your business assets, and enhance your business reputation. However, a commercial auto insurance policy is not a substitute for safe driving practices and risk management strategies. You should always maintain a good driving record, choose a safe vehicle, install safety features, train your drivers, and follow the traffic rules to prevent accidents and reduce your insurance costs.

If you want to learn more about a commercial auto insurance policy or get a quote for your business, please contact us today or visit our website. We are here to help you with all your commercial auto insurance needs.